The government in Budget 2019 has announced to continue with its thrust for Affordable Housing. The FM has proposed that 1.95 crore houses from FY 20-22 will constructed under PMAY, which will have amenities such as LPG, electricity and toilet.
From giving infrastructure status to the Affordable Housing segment, increasing the carpet area and re-defining income definitions, the government has been consistent with its efforts in addressing affordable housing.
The previous budget had given a boost to the affordable housing by creating a dedicated fund under the National Housing Bank (NHB).
So all these efforts by the current govt will automatically result in increased number of Housing projects and yes increased number of Real Estate Players in the market.
So to deal with those Existing Developers and Future players, we need to have a clear understanding about new GST rates that shows their applicability from 1st April 2019.
Some Important Definitions we need to understand.
· Affordable Residential Apartment (Chota Ghar)
I like to call them Chota Ghar. These are those apartments whose carpet area is not more then 60 square meter (72.455 square guz in our language or 2.37221 Marlas in Punjab Region) in metro cities like Delhi, Gurgaon (or as per our respected Sarkar Gurugram), Kolkata etc and 90 square meter (108.683 square guz or 3.55831 marlas) in non-metro cities AND Gross Amount charged by builder is not more than 45 Lakhs.
So that means if any of the above two conditions get satisfied, your house does not remain as chota ghar, it will be considered as bada one as per our gst rules.
· Non-Affordable Residential Apartment (Bada Ghar)
These are bade ghar as per our gst rules. These are those apartments that are not affordable apartments. This means that whose carpet area is more than 60 or 90 square meter or whose consideration charged by builder exceeds 45 lakhs.
· On Going Projects
A project which meets the following conditions will be considered as On-Going Projects:
a) Commencement certificate issued Before 31/3/2019 +
Certified by any of the 3 persons:
1. Registered Architect
2. Chartered Engineer
3. Surveyor
b) If commencement certificate not required then certified by any of the 3 persons above.
c) Completion certificate has not been issued or first occupation of the project has not taken place on or before 31st March 2019.
d) Apartments of the project have been, partly or wholly, booked on or before 31st March 2019.
· Residential Real Estate Project
Real Estate Project in which carpet area of the commercial apartment is not more than 15 % of the total carpet area of all the apartments in the project.
First thing and the most Important thing that we should Remember.
We are not talking about fully constructed Building, because as per Schedule 3 of CGST Act 2017, Sale of Land and sale of Building after getting the completion certificate shall neither be considered as supply of goods nor supply of services and hence it will not be taxable under GST regime.
Hence, we are only talking about sale of Under construction apartments on which completion certificate has not been obtained.
Commercial Apartments
1) Old Scenario
Earlier Construction of Commercial apartments was taxed with the effective rate of 12% after deducting 1/3rd as abatement for the value of land.
2) New Scenario
Now with effect from 1st April 2019 Construction of Commercial apartments in Residential Real Estate Project (RREP) whose construction is commenced after 1st April 2019 shall be Taxed @ 5% on gross consideration without the option of Input Tax Credit.
Construction of Commercial apartments in Real Estate project (REP) other than residential real estate project whose construction is commenced after 1st April 2019 shall be Taxed @ 12% on gross consideration with the option of Input Tax Credit also.
Residential Apartments
1)Old Scenario
Earlier GST rate applicable for Affordable Residential apartments was 8 % and 12% for Non-Affordable Residential Apartments with the option of Input tax credit.
2)New Scenario
Now with effect from 1st April 2019 GST will be applicable @1% for affordable residential apartments and @5% for Non-affordable residential apartments without the benefit of Input
tax credit.
On-Going Projects
Our Govt is very humble and specially in respect to GST.
Govt has provided an option to all the builders to opt for old rates for the project which was commenced before 1st April 2019.
Some Points you need to keep in mind if your client has some On-Going Projects:
· You have to manually apply for old rates to your jurisdictional officer.
· Option has to be availed before 10th of May 2019.
· Option has to be availed for each project separately.
· If you do not exercise any option, it would be deemed that you have exercised the new option. (This would be useful for your consultancy and make you some money)
· Option can not be availed for new projects that commenced after 1st April 2019.
· GST charged as per old rates till the option is exercised (as you can exercise till 10th may) shall be adjusted by issuing credit notes and debit notes.
There is a whole different scenario for GST on Transfer Development Rights which would be discussed in my next article.
Hope you enjoyed reading my article and hope you make some money too after reading my article.
Happy Reading man, Have a Very Good Day.
This article is authored by CA Kushagrah Mehta who is a chartered accountant in practice and can be reached here at cakushagrahmehta@gmail.com
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